Das neue deutsche "Anti"-Übernahmegesetz aus amerikanischer Perspektive

Ich möchte diese Gelegenheit nutzen, um die amerikanische Sicht auf einen wohl immer bedeutenderen Bestandteil der deutschen Corporate Governance-Landschaft, das feindliche Übernahmeangebot, darzustellen. Ob Übernahmeangebote von einem ausländischen Bieter abgegeben werden (man denke nur an das Gebot von Vodafone an die Aktionäre von Mannesmann oder an das Gebot von Barilla für Kamps), oder ob es von einem einheimischen Bieter stammt – wer könnte Krupps Gebot für Thyssen vergessen ? –: Feindliche Übernahmegebote betreffen nicht nur die Führungsorgane der einzelnen Zielunternehmen, sondern, wegen ihrer Bedrohung für festgefahrene Geschäftsmuster, auch das ökonomische und politische Umfeld

The Puzzling Persistence of the Constrained Prudent Man Rule

Professor Gordon examines a seeming paradox: How did a rule named for the prudent man, with its connotations of wisdom and judiciousness, become a constraint that discourages trustees and other fiduciaries from making investments now regularly favored by prudent investors? He argues that the current understanding of the Prudent Man Rule, the standard governing investments by trustees and other financial fiduciaries, is founded on a narrow conception of risk and safety that has been superseded by contemporary understanding of markets and investments, and in particular, portfolio theory. He identifies three factors that have prevented the Rule from evolving in response to modern investment theory: an authoritative treatise that has inhibited the normal common law process of reinterpretation and change; potential litigants who are poorly situated for litigation or who are unable to contract out from under the Rule\u27s strictures; and the difficulty courts have in assimilating complicated economic theories that seem to involve sweeping doctrinal change. Professor Gordon concludes by arguing that, contrary to courts\u27 fears, the only significant clash between portfolio theory and trust doctrine arises in the allocation of returns between life beneficiaries and remaindermen, and he analyzes ways of resolving the conflict

An international relations perspective on the convergence of corporate governance: German shareholder capitalism and the European Union, 1999-2000

The corporate convergence debate is usually presented in terms of competing efficiency and political claims. Convergence optimists assert that an economic logic will promote convergence on the most efficient form of economic organization, usually taken to be the public corporation governed under rules designed to maximize shareholder value. Convergence skeptics counterclaim that organizational diversity is possible, even probable, because of path dependent development of institutional complementarities whose abandonment is likely to be inefficient. The skeptics also assert that existing elites will use their political and economic advantages to block reform; the optimists counterclaim that the spread of shareholding will reshape politics

Executive Compensation: If There\u27s a Problem, What\u27s the Remedy? The Case for Compensation Discussion and Analysis

High levels of executive compensation have triggered an intense debate over whether compensation results primarily from competitive pressures in the market for managerial services or from managerial overreaching. Professors Lucian Bebchuk and Jesse Fried have advanced the debate with their recent book, Pay Without Performance: The Unfulfilled Promise of Executive Compensation, which forcefully argues that current compensation levels are best explained by managerial rent-seeking, not by arm\u27s-length bargaining designed to create the optimum pay and performance nexus. This paper expresses three sorts of reservations with their analysis and advances its own proposals. First, enhancing shareholder welfare is not, as a positive or normative matter, a sufficient framework for understanding the controversy or devising a remedy. Second, many of the compensation practices identified by Bebchuk and Fried as veritable smoking guns of managerial power may have benign explanations. Third, in improving the corporate governance apparatus in the executive compensation area, the better remedy is not a wholesale expansion of shareholder power, but a tailored series of measures designed to bolster the independence of the compensation committee. Most important, the SEC should require proxy disclosure of a Compensation Discussion and Analysis statement (CD&A) signed by the members of the compensation committee (or by the responsible independent directors for firms without a compensation committee). Such a CD&A ought to collect, itemize, and summarize all compensation elements for each senior executive, providing bottom line analysis and then a justification by the compensation committee of the compensation paid. This process of ownership, reputation-staking, and publicity will strengthen the committee\u27s hand against managerial pressure and will elicit both shareholder and public responses that necessarily contribute to the compensation bargain. In addition, serious thought should be given to a shareholder approval vote on the CD&A, following the new United Kingdom practice

Proxy Contests in an Era of Increasing Shareholder Power: Forget Issuer Proxy Access and Focus on E-Proxy

The current debate over shareholder access to the issuer\u27s proxy statement for the purpose of making director nominations is both overstated in its importance and misses the serious issue in question. The Securities and Exchange Commission\u27s ( SEC\u27s ) new e- proxy rules, which permit reliance on proxy materials posted on a website, should substantially reduce the production and distribution cost differences between a meaningful contest waged via the issuer\u27s proxy and a freestanding proxy solicitation. No matter which avenue is used, however, the serious question relates to the appropriate disclosure required of a shareholder nominator. Should the nominator be subject to the broad-ranging disclosure requirements now associated with the freestanding contest? Or should there be curtailed disclosure for a nominator (who disavows control motives) of a limited number of directors whose election will not change control? The inescapable costs lie in disclosure, not so much because of the drafting costs, but because of the liability standard associated with the current proxy solicitation rules. A party may be subject to a private suit for material misstatements or omissions in connection with a solicitation even without a showing of scienter. Disclosure under such a regime entails not only the up-front costs of precaution, but also the uncertain (and potentially high) costs of litigation. These costs-not the production, distribution, or other solicitation costs in an e-proxy- eligible world-will constrain director nominations made by a good governance activist without a large stake or a control motive. The current regulatory round associated with the SEC\u27s sidestepping of the Second Circuit\u27s proxy access opinion in AFSCME v. AIG1 is a sideshow, diverting attention from this important issue. Part I of this Essay briefly describes what shareholder access to the issuer\u27s proxy statement entails. Part II summarizes how we have come to the present regulatory moment. Part III describes the e- proxy rules that should lead us to refocus the debate. Part IV sets up the key question: what is the appropriate disclosure (in content and liability risk) to require of a shareholder nominator? One obvious possible distinction is between nominators with and without control motives; another is between instances in which the election of shareholder nominees would or would not shift control of the board

Corporate Governance and Executive Compensation in Financial Firms: The Case for Convertible Equity-Based Pay

Unlike the failure of a nonfinancial firm, the failure of a systemically important financial firm will reduce the value of a diversified shareholder portfolio because of economy-wide reductions in expected returns and a consequent increase in systematic risk. Thus, diversified shareholders of a financial firm generally internalize systemic risk, whereas managerial shareholders and blockholders do not. This means that the governance model drawn from nonfinancial firms will not fit financial firms. Regulations that limit risk-taking by financial firms can thus provide a benefit, rather than necessarily impose a cost, for the typical diversified public shareholder. Managerial shareholding also gives rise to a particular problem of the CEO who, despite the increasing precariousness of the firm\u27s position, may be reluctant to pursue equity infusions or to sell the firm because of the resulting dilution of his ownership stake. This might be called the Fuld problem. To mitigate excessive risk-taking both in ordinary operations and as the firm approaches financial distress, this paper proposes a new compensation mechanism for senior managers: convertible equity-based pay. Upon certain external triggers – for example, a regulatory downgrade into a high-risk category, deterioration in a key financial ratio, or a significant stock price drop – such stock-based compensation should convert into subordinated debt, at a valuation discount. This will give managers an incentive to curb excessive risk-taking and, in particular, to steer the firm away from financial distress

Shareholder Initiative: A Social Choice and Game Theoretic Approach to Corporate Law

When it comes to specific business matters, it seems that an objecting shareholder can do no more than offer a precatory resolution that provides shareholder advice on the issue. Adoption of such a resolution obviously sends a strong signal to management, as do informal contacts by important shareholders, that a management seeking to avoid a control contest may be well-advised to heed. Nevertheless, management can ignore such expressions of shareholder. preference and, indeed, can pursue policies and extraordinary transactions that it knows shareholders would reject. Thus for the large public corporation the pattern of delegation gives management virtually unbounded decisionmaking authority over business matters and agenda control over significant changes in the management-shareholder relationship. The shareholders\u27 power consists almost exclusively of the power to revoke the delegation through a control contest, or more problematically, through acceptance of a hostile tender offer. There is no power of shareholder initiative. This pattern of shareholder-manager relations may be called the absolute delegation rule. The question is why this pattern has arisen and persisted and the circumstances under which it might be changed. Why shouldn\u27t Carl Icahn be able to take to shareholders for resolution the question of whether USX would be more valuable if broken up into two separate corporations? There is a substantial argument that the conglomeration of oil and steel was the result of an agency problem: management pursued diversification to protect its jobs against the bankruptcy risks of the steel business at the expense of shareholders, who could have obtained such diversification at the portfolio level more cheaply, since common ownership entails the potential cross-subsidization of steel losses from oil profits. Such agency problems could more easily be controlled were shareholder initiative available as an alternative to a full-scale control contest. Alternatively, on some particular business matters, shareholders may believe their perceptions and judgement are superior to management\u27s. Carl Icahn may in fact have had a better view of the long term comparative futures of steel and oil than the USX management. In both cases it may be that the incumbent management otherwise ably runs the enterprise, but is tempted to serve its particular interests or makes a mistaken prediction about the future. Why leave shareholders with only one avenue – an election contest aimed at the board of directors – to force a particular change in business strategy? This paper argues that the two standard justifications of the absolute delegation rule are incomplete, the first, based on management\u27s informational advantage; the second, based on the management/agent\u27s success in maintaining power over the shareholder/principal. I argue on behalf of a third explanation: that the absolute delegation rule avoids several sorts of pathologies that would emerge in the strategies of shareholder voting. Shareholders give away power because, in many circumstances, the effects of the shareholder initiative would be wealth-reducing. In particular, shareholder initiative would produce strategic behavior designed to maximize private gains at the expense of common gains. I hope to demonstrate these points with analysis drawn from the social choice and game theory literatures

Just Say Never? Poison Pills, Deadhand Pills, and Shareholder-Adopted Bylaws: An Essay for Warren Buffett

My topic is Buffett on mergers and acquisitions and how his sage advice on the importance of shareholder choice should be taken to heart by the Delaware Supreme Court, which will soon face far-reaching questions on the distribution of power between shareholders and the board of directors. Recent judicial decisions in other jurisdictions: (i) have declared that a board can maintain a poison pill in the face of a premium hostile bid, the power to just say no; (ii) have validated the board\u27s adoption of a so-called deadhand pill, a poison pill that can be redeemed only by continuing directors; and (iii) pointing in a different direction, have permitted shareholders to use their bylaw amendment power to constrain the adoption and maintenance of a poison pill. The dynamics of takeover practice are likely to produce cases presenting similar questions involving Delaware targets, and once again the Delaware Supreme Court will have the opportunity for influential rulings on the shape of corporate law. The poison pill has become the main vehicle through which a target board controls the firm\u27s exposure to a hostile bid; its use affects not only the scenarios that emerge after the making of a hostile bid, but pre-bid strategy as well, including the initial decision whether to make a bid. Thus, each of these questions about the use and limits of the poison pill entails potentially far-reaching consequences for the market in corporate control

The Empty Call for Benefit-Cost Analysis in Financial Regulation

The call for benefit-cost analysis (BCA) in financial regulation misunderstands the origins and utility of BCA as a guide to administrative rule making. Benefit-cost analysis imagines an omniscient social planner who can calculate costs and benefits from a natural system that generates prices (costs and benefits) that do not change (or change much) no matter what the central planner does. For example, the toxicity of chemicals, the health hazards of emissions, the statistical value of life – these do not change in response to health-and-safety regulation. For the financial sector, however, the system that generates costs and benefits is constructed by financial regulation itself and the subsequent processes of adaptation and regulatory arbitrage. An important new rule will change the system beyond our calculative powers. Instead of weighing costs and benefits, financial regulation necessarily is based on a series of trade-offs of normatively derived values, which may entail principles of pragmatic design